July 27, 2009

Central Banking: The Check That Bounced

Among the list of America’s most influential institutions, the Federal Reserve is probably the least understood. Ron Paul is trying to change that, and in doing so has become a popular target for many economists and economic journals. Yet it’s precisely because of the Fed’s influence that most of Paul’s critics are themselves ardent Fed watchers.  With the Fed being so influential, why should anyone be opposed to hard scrutiny of it?

It is difficult to view all this without considering Hans-Hermann Hoppe?s assessment of democracy . One reason the other Triple H says democracy is worse than monarchy (where ascendancy is an accident of birth) is because under a democracy, the idea exists that anyone can potentially become a ?public servant? and gorge upon the fruits of the State. A similar phenomenon seems to be at work with Paul’s pro-Fed critics. I bet many at least subconsciously believe they might one day be a Fed chairman, which in addition to letting them test their four-leaf models would enable them to exploit the prestige and power of the position. Were that institution to be compromised or (gasp!) eliminated, their shot at helming it would be compromised too (along with the demand for most of the Fed gossip they now publish).

Sorry Fedists, but it may be time you got used to a new Wall Street truism:  Don’t fight the Fed Audit!

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